An update on the changes to CVA's brought about by the introduction of the New Rules.
1. CONSOLIDATION OF THE RULES
1.1. The New Rules applicable to CVA's are found at rules 2.1 to 2.45 of the New Rules, (formerly found between 1.1 to 1.55 of the Insolvency Rules 1986 ("IR86")). There has been an element of consolidation of IR86 applicable to CVA's and relating to:
- Consideration of the CVA Proposal, now found at New Rules 2.25 to 2.27 (formerly at 1.9,1.11, 1.48 of IA86).
- Members' Voting Rights, now found at New Rule 2.35 (formerly at 1.20,1.53 of IA86).
- Requisite Majority of Members, now found at New Rule 2.36 (formerly 1.20 and 1.53 of IA86).
- Hand-over of Property to the Supervisor, now found at New Rule 2.39 (formerly 1.23 and 1.54 of IA86).
1.2. In summary, the consolidation of the above provisions has not resulted in material changes to the substantive and procedural provisions formerly understood under IA86.
2. NEW PROVISIONS
2.1. Certain new provisions relating to CVA's have been inserted into the New Rules relating to: (i) Creditors' approval of modified proposals; and (ii) the Requisition of physical meeting by Creditors. Addressing each addition inserted into the New Rules.
Modified Proposals in CVA Moratorium's
2.2. New Rule 2.29 provides that, following a notice to the Nominee of the proposed modifications ("Notice"), where a decision is sought from the creditors to approve or reject a modified proposal from the company's directors under paragraph 31 (7) of Schedule A1 to the Insolvency Act 1986: (i) a decision must be sought within 14 days of the date on which the directors gave the Notice; and (ii) the creditors must be given 7 days' notice of the decision date.
2.3. Paragraph 31(7) of Schedule A1 to the Insolvency Act 1986 is as amended by paragraph 9 (18 and 19) of Schedule 9 to the Small Business, Enterprise and Employment Act 2015. This provision provided for the directors to give notice of proposed modifications 7 days before the meeting summoned to consider the implementation of a CVA (with a moratorium). The amendments incorporated into the New Rules appear to contemplate the 'Decision' making procedure in the New Rules which must be sought within 14 days of the Notice.
Requisition of Physical Meetings
2.4. New Rule 2.31 provides that if creditors requisition a physical meeting to consider a proposal (with or without modifications): (i) the meeting must take place within 14 days of the date on which the prescribed proportion of the creditors have required the meeting to take place and (ii) Notice of at least 7 days is required for the physical meeting. In our view, such meetings will be convened if the creditors wish to further examine or challenge the decision of the Nominee and will need to take place subject to proper notice being provided to creditors.